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Note ban dampens agri sector despite near normal monsoon

The report lists the low prices of agri commodities and almost nil growth in non-farm income which constitute two-thirds of the rural income, and curbs on cash transactions and sand mining

By Vicky
|
Google Oneindia News

The near normal monsoon may not bring a big cheer in the agriculture sector. This is due to depressed agri commodity prices and the lingering impact of demonetisation and GST says a report.

Note ban dampens agri sector despite near normal monsoon

"Though there is a marginal uptick in consumption it's driven by credit. Since wealth effect remains weak in the hinterland there is no large ticket consumption. Therefore, we see only a marginal improvement in overall rural income, though the monsoon has been near-normal," says JM Financial in its 'Rural Safari' report.

The report lists the low prices of agri commodities and almost nil growth in non-farm income which constitute two-thirds of the rural income, and curbs on cash transactions and sand mining and the GST related disruptions as the main reasons for the problem.

The still continuing curbs on sand mining and cash transactions, along with GST-led disruptions and lower prices of agri-commodities have all moderated economic activity levels in the first half. This will cap the overall growth in farm income for the full fiscal year, say the brokerage's analysts, led by Arshad Perwez and Suhas Harinarayanan.

However, the survey indicates that the final kharif crop output could be higher than the government's first estimate as so will be the rabi output, as barring central regions the water levels are adequate.

This is because of the weak global agri-commodity pricing, and the only saving grace for the farmers is the resilience in vegetable prices, they said.

"Vegetables constitute 25-30 of agri income and cereals that chip in with another 20 per cent, which should ensure high single-digit growth in farm income in FY18. The only areas to watch out for are the prices of pulses and oilseeds, which were the trigger for farmer-led protests during June-July this year," the analysts said.

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